Having been a railway driver as a young man, Chifley worked for a rail-workers' union in New South Wales. He then served in Parliament (1928–31) and, failing reelection, engaged in many public activities. His participation on the royal commission on banking (1935–37) shaped his later financial policies.

When the Labor Party regained control of the government under John Curtin in 1941, Chifley became federal treasurer and imposed strict wartime control over the economy, including expansion of federal taxing powers. He succeeded Curtin in 1945 and soon sponsored legislation governing the interrelations of state and private banks and the federal government. His government also nationalized Qantas (the Australian international airline), and established Trans-Australia Airlines (the government-owned domestic airline). Among other accomplishments of his government were public-health and labour-arbitration bills, agricultural and industrial development, and the founding of the Australian National University in Canberra as a centre for postgraduate research.

In 1948–49 Chifley altered Australia's traditional hostility toward Asian nations by siding with the Indonesians against the Dutch in the Netherlands East Indies (now Indonesia). His moderate attitude toward the Australian Communist Party and his unsuccessful attempt to nationalize private banks led to his defeat in the elections of 1949. He continued as leader of the Labor opposition in Parliament until his death.